Governance Forum "Advance Confirmation of Government Value-Up Plan B-... Guidelines"

Corporations Not Returning Profits Should Be Taxed
Continuous Efforts Needed to Improve Commercial Law System

Namwoo Lee, Chairman of the Korea Corporate Governance Forum, rated the government’s corporate value-up support plan announced on the 26th as a B- grade. Chairman Lee also pointed out, "June is too far away. The market's patience is limited," urging that the timing for finalizing the guidelines should be brought forward.

Namwoo Lee, Chairman of the Korea Corporate Governance Forum, is revealing a letter addressed to the Financial Services Commission Chairman and the new Chairman of the Korea Exchange at the 'Korea Corporate Governance Forum New Year Press Conference' held on the 5th at Two IFC, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

In his commentary on the day, Chairman Lee stated, "Both the government and the market know the model answer for the guidelines. Delaying only increases market uncertainty," he criticized.

Earlier that day, the government unveiled a draft of the ‘Corporate Value-Up Program,’ which requires all listed companies on KOSPI and KOSDAQ?about 2,400 firms?to voluntarily disclose their corporate value enhancement plans annually. The Financial Services Commission plans to collect corporate feedback on the first guideline by May and finalize the plan by June.

Chairman Lee said, "It is difficult to understand the financial authorities’ claim that four months are needed from holding the second seminar in May to finalizing the guidelines in June," adding, "I hope the guideline finalization can be advanced by one to two months."

Regarding the corporate value-up support plan announced by the government that day, he gave it a B- grade. Chairman Lee said, "If in the second half of this year and in 2025, as the government hopes, the PBR multiples of listed companies rise and shareholder returns expand, resolving the Korea discount, the support plan will receive a final grade of A."

He also proposed considering a policy to tax companies that do not return profits to shareholders. He explained, "The most interesting measure in the international financial market is tax support for companies that voluntarily retire treasury shares. While tax support for dividends is meaningful, policies taxing companies that do not return profits to shareholders, like in Taiwan, are also worth considering. In fact, Taiwan introduced additional taxes on profits not returned to shareholders, which led to increased dividends."

Furthermore, he urged that four principles must be observed to enhance the effectiveness of the value-up support plan and to make it a sophisticated policy tool. Specifically, he suggested △ the core of the value-up program should be a template, not tax support △ spreading best practices like Meritz Financial Group △ appointing the head of the financial authorities as a project manager (PM) △ building partnerships between financial authorities and major domestic and international long-term investors △ and communication with the market.

Finally, he emphasized that while promoting soft norms like the value-up support plan is important until the Korea discount is resolved, legal and institutional improvements must also be pursued. Chairman Lee proposed, "From the perspective of fundamentally strengthening general shareholder protection, continuous efforts should be made to improve laws and systems, especially amending Article 382-3 of the Commercial Act to add directors’ duty of loyalty to shareholders. Additionally, the separate taxation of dividends for long-term investors is highly effective and must be implemented."

This content was produced with the assistance of AI translation services.